About: Modern Economics as Metaphysics and Abstract Nonsense

I started this blog in 2010. At the time I was reading very little theoretical economics. I was really just picking through current events and economic commentary, trying to sort the wheat from the chaff. Since then I got interested in economic theory and undertook a Masters degree in the subject. In this time I gradually came to think that the only remotely reasonable approach to economics is what is generally known as the Post-Keynesian approach. Although this may make me sound ridiculously partisan, it seemed to me that every other school of thought — marginalist, New Classical, Neo-Keynesian, New Keynesian, Austrian and Marxian — were just crude, out-of-this-world metaphysical systems. Post-Keynesian economics was the only strain of thought that seemed to me remotely practical and applicable to real-world problems.

All the other systems of thought seem to be based on these Big Questions about things which really have no relevance for trying to figure out what is, for example, happening in the macroeconomy or in financial markets or what policies might make peoples’ lives better. But at the same time these doctrines spread a sort of poison in the minds of men. They encourage them think in weird ways and to make claims that would not be out of place in a cult. They give the adherents the characteristic of appearing to believe what “no man could believe who had not had his head fuddled with nonsense for years and years”, as John Maynard Keynes said in a similar context.

At the same time as coming to this realisation I also came to appreciate how important good economic theory is for organising our societies — not to even mention the fact that economic language is, in a very real sense, the language of power and governance today. This meant that not only were these crude metaphysical systems making potentially thoughtful people say completely stupid things, but they were also acting as a significant blockage to human progress. Of course, this blog will not change the culture of metaphysics and garbage that passes for economic debate these days. But at the very least I hope to be able to chronicle the most patently silly absurdities — if for no other reason then at least for my own amusement.

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32 Responses to About: Modern Economics as Metaphysics and Abstract Nonsense

That picture is an unfortunately accurate depiction of how it feels to read my economic notes in college. I love economics and I hate to see it ruined (and so many of my classmates put off) by abstract nonsense.

There is a double edged sword here — on one hand, attempts to meaningfully study complicated social interactions in an increasingly complex world require reducing the complexity to symbols and other abstract representations of reality, on the other hand something is lost when doing it.

Although I am a socialist, I’m no Marxian one (I was once, but given the emotional tenor of any discussion pertaining to Marx’s value theory, I simply couldn’t stand it anymore, particularly given the tendency of myriad interlocutors to invoke the dreaded ‘dialectic’, whatever that is; granted however there is much else of use in Marx). Historical (List was right about the importance of protectionism to economic development) and Veblenite Institutional economics don’t seem all that bad, Keynes I’ve yet to consider (Sraffa is, perhaps, also worth a read), but as far as I’m concerned, the more atheoretical economics is the better.

Well, I’m not a Socialist. I’m pretty left-wing, but I see that as completely separate from my economics. The question of distribution is purely where the surplus goes — yes, Sraffa/Ricardo are a big component of Post-Keynesian economics. To me Socialism means very little when you understand how the macroeconomy works in terms of distribution.

If you’re interested in economics though, and don’t buy the Marxian nonsense, I’d encourage you to look into Post-Keynesian economics. It really is neutral. You could run a Soviet economy with it, just as you could run a highly capitalist economy with it. It is a truly neutral perspective and allows you a lot of leeway in your views. That’s why Keynes called it a “General Theory”. It really is. In the preface to the German edition Keynes says explicitly that the theory is even more suited to control economies. Check it out.

I should also have added that I only happened across your blog by typing the question, ‘is all economics nonsense?’, into Google. I would assume that that question, in addition to similarly worded queries, possibly functions as a decent source of traffic.

There’s a lot to talk about here Phil. As I said I came across your blog by chance but I suspect I’ll be here for a while. First another clarification question: you don’t really think that Keynes called it the “general” theory because: “It is a truly neutral perspective and allows you a lot of leeway in your views.” do you?

I think so, yes. The consensus is that Keynes was giving a nod to Einstein’s General Theory of Relativity in which Einstein aims at a properly general theory in which Newtonian theory is but a particular instance. Keynes was trying to provide a general theory too in which the neoclassical/marginalist theory of clearing markets with flexible prices was a particular and rather unlikely incidence.

Maybe so, but I had thought (given the text of GT), his title referred not to “any economic system” (a phrase which I think you’ll agree carries institutional baggage), but was rather used as a deliberate contrast to the “classical” theory which (according to Keynes), is only applicable in a SPECIAL case…and here I agree with you, he means equilibrium.

Yes, but once we leave behind the “special case” — i.e. market clearing equilibrium — it can applied to any for of economic organisation. He says this explicitly in the German preface that the Austrians always attack:

I begin to feel like a medieval scholar counting the number of angels on a pinhead! Nevertheless….your point that Keynes believed the GT to be applicable to totalitarian economies as well as non-totalitarian economies is indeed proven. However I don’t think you can make a case for that being the REASON for the use of the word “general”. It most certainly was not.

This is one of the reasons that justifies the fact that I call my theory a general theory. Since it is based on fewer hypotheses than the orthodox theory, it can accommodate itself all the easier to a wider field of varying conditions.

This is tricky. In isolation it is quite legitimate to see (in this preface) an applicability to a variety (totality?) of institutional frameworks as Keynes’ reason for the use of the word “general”, but a familiarity with the text of the GT (which you clearly possess) and that the two marvellous volumes: http://www.amazon.co.uk/Collected-Writings-John-Maynard-Keynes/dp/0521348293

Does not support that reading. It is a corollary of the general nature of Keynes’ theory that it fits many institutional frameworks…but that’s BECAUSE is general! He was thinking about a theory of output determination which applies in all states of the economy. His idea of the Classical system being one which only applied to special cases.

Anyway I think we’ve probably exhausted this one. I have never come across your interpretation of the name of the GT before. And although I think it incorrect, it is interesting.

I think you’re misunderstanding me: it is both. It is general because it applies to an economy — any economy — in any given state. And therefore, it can be applied to any economy. That is why Keynes says that “This is one of the reasons that justifies the fact that I call my theory a general theory.”

In that post I linked to a while back I lay out my idea for a general theory of prices. Similarly, it is a general theory because it applies to price dynamics in any given state (the marginalist market is a particular case). But it can also be applied to any instance of price formation.

Alright Phil, there must be some misunderstanding here but I can’t see why.

We’re discussing what is an extremely minor point (and I am squarely to blame here!).

But here’s one last go at clarification:

1. I noticed you say that the reason why the GT is called “general” is because Keynes saw it as applying to all economies regardless of institutional framework and political system.

On this I think there is no room for misunderstanding we agree that you said this and we agree on what you meant by it. We also agree Keynes was attempting a theory of economic behaviour so of course, mutatis mutandis, if that theory is correct in one set of institutional circumstances, it would fit all.

2. Ok next you cite the German preface of GT in support of your contention in 1 above.

3. My argument is that while Keynes may well have seen his theory as being applicable not only to economies with democratic institutions, that was most definitely not his REASON for using the term “general”.

Unless I’ve missed something (altogether possible of course!) I see no scope for misunderstanding.

While I would contend the German preface is not a place to find Keynes’ theory, I do think what he says on page three is definitive, and I’m sure you know this passage well. (My added emphases).

“I have called this book the General Theory of Employment, Interest and Money, placing the emphasis on the prefix GENERAL. The object of such a title is to CONTRAST the character of my arguments and conclusions with those of the CLASSICAL theory of the subject, upon which I was brought up and which dominates the economic thought, both practical and theoretical, of the governing and academic classes of this generation, as it has for a hundred years past. I shall argue that the postulates of the classical theory are applicable to a SPECIAL case only and NOT to the GENERAL case, the situation which IT ASSUMES being a limiting point of the possible positions of equilibrium. Moreover, the characteristics of the SPECIAL case assumed by the classical theory happen not to be those of the economic society in which we actually live, with the result that its teaching is misleading and disastrous if we attempt to apply it to the facts of experience.”

Finally it is surely the case that Keynes really did not think of Marshall et al were simply writing about the Victorian British economy whilst the “general” theory would apply to the Victorian British economy as well as the German totalitarian economy and indeed any others.

His point is that the classical theory applies to NO economy (except in SPECIAL circumstances).

… I’m thinking ‘general’ because the D & Z curves are not on top of each other [that would be special] where Say’s Law doesn’t hold and we normally reach an equilibrium [e.g., S = I, Ps = Pd, or MEK = i] below full employment … (see Davidson, Kregel, and Wray on this) …

apologies if you guys covered that and I missed it. really just wanted to tell how much I like your work but can’t keep my mouth shut sometimes …

Dear Mr. Pilkington, I fully agree with you. I am not an economist myself (a geologist actually). The mechanics of our economic system have always intrigued me, but what I read about it in economic textbooks somehow did not match with my own experiences. That is, until I read Steve Keens Debunking economics and subsequently discovered Godley and Lavoie’s textbook Monetary economics.

I am now convinced that economic theories which are not stock-flow consistent or not likely to be stock-flow consistent are not really worth studying and that economists who are not aware of this should not be taken too seriously.

Hey Phil, was just wondering, what did you get a bachelors in? I am considering getting a Masters in Econ as well, but my undergraduate degree was in the Humanities, a completely different field of study…

Mine was in journalism. Although I did economics and sociology prior to that (never finished it). If you want to do an MA in economics and you have been doing something entirely different you are best off avoiding the mainstream departments as they will be overly mathematical. But if you find the right course and are willing to work at it I think its actually probably a good thing to transition.

“… reflecting a deeply held conviction that the essence of life is that things change and those who try to form a perfect, self-contained grasp of the world that can be applied in any situation regardless of context are completely misguided in their chasing of the ever elusive ghost of perfection and timelessness.”

No one would disagree that ‘things change’ — it’s just what ‘things’ you are talking about. There are some seemingly immutable forces of nature like gravity or the strong nuclear force. Of course things like morals and social norms change — certainly something that should be reinforced.

Your complaint of people that search for a ‘perfect, self-contained grasp of the world …chasing the ever elusive ghost of perfection and timelessness’ is an interesting, if muddled, statement. I think it speaks volumes about your own metaphysical assumptions. I actually, find that view rather sad. My philosophy is loosely based upon the principles of the old management philosophy T.Q.M. (which influenced lean and six sigma) and is based upon the idea of continual improvement. I believe it important strive for a better, refined, clearer understanding of the world. Six sigma strives for ‘zero defects’ and I believe taking that approach to live is much better than the somewhat popular meme that it is misguided to try to achieve perfection.

I think I had a similar path in trying to understand Post Keynesian related economics myself. Started out by blindly buying into all those neoclassical notions and gradually as I started to read more of these kinds of blogs, my opinions started to change as I became much more informed. Thank you for running such an informative blog and the same goes to Lord Keynes and all the others who are part of this economic school of thought. I still have much to learn but it’s a really interesting and fresh way of looking at how the real world works.